The co-founder of iamsold says that the firm’s ambition is to make the modern method of auction mainstream – with agents routinely offering it to vendors as a way of selling.
Jamie Cooke said that 2,500 estate agency branches already work with the Newcastle-headquartered business, using it as a white-labelled product.
He said there is plenty of growth still to come, with research showing that three in ten sellers would consider using the modern method of auction – “a huge target in terms of transactions”.
The modern method of auction is sometimes called a conditional auction, giving bidders time to assemble their finances before going ahead with their purchase.
It has also proved controversial, with the HomeOwners Alliance criticising it for alleged lack of transparency – something that iamsold categorically denies.
As a method of sale, its appeal to vendors is that they don’t generally pay commission – the buyer does – and there is increased certainty that the transaction will go through. However, they might not achieve the full value that a private treaty sale could.
For buyers, there is also the increased chance of certainty, with the property taken off the market while they put arrangements in place, but the drawback comes in the form of fees which they wouldn’t normally have to pay an agent in a private treaty sale.
The fees, split between the agent and iamsold, range between 2.5% and 4.2% including VAT, says Cooke.
The minimum fee, regardless of the price of the property, is however £5,000 – which works out to £6,000 including VAT. Could that come as a shock to a buyer, perhaps?
Iamsold says not – and has just released a new, voluntary code of practice which it hopes will become industry-wide, and which stresses transparency.
There is, potentially, an anomaly in that agents do not have to declare the cut that they get from iamsold in the way that they should declare referral fees (the Government has made it clear that unless agents declare referral fees – both what they are and how much – it will outlaw them altogether).
However, Cooke says that what agents earn from iamsold is not a referral fee, but a share of the commission earned by the two instructed companies.
Technically, agents do not have to declare earnings which aren’t referral fees. But could this be something of a wavy line?
Iamsold says not: it has consulted with regulator NTSEAT and both are agreed that as long as the arrangements are set out at the start, there is compliance.
Iamsold’s new code does say it should be made clear to vendors that buyers are likely to factor the fees they will be charged into their bids.
However, Cooke told EYE that there is “no specific evidence” that buyers actually do this – it is, he says, more about agents explaining the advantages and disadvantages of the method.
A clear advantage is that fall-throughs are minimal after the fall of the electronic gavel, at under 5%. Another advantage is speed – deals typically take under 50 days to complete although the system allows 56.
As the partner that is jointly instructed in each sale, iamsold undertakes considerable compliance, including anti-money laundering checks.
Cooke says that the old perception that sellers resort to auction on a cyclical basis – auctions are popular when markets are down, less so when they are up – is out of date.
He says there are two reasons to use the method: “One is when people need to get on and sell, and the other is where the agent has a property for which they believe there will be significant demand.
“Auction is a bit of a dirty word, and it won’t suit every property or vendor, but actually it’s an intensely compelling proposition for some.”
Auctions, says Cooke, are no longer about property investors looking for bargains, with just over half of all iamsold buyers purchasing for their own occupation.
And while the modern method can be offered both virtually and in bricks-and-mortar reality, some 70% of such sales are online.